Similar to your idea of buying AAPL and shorting AMZN, Barrons points out the high multiples of AMZN, CRM and NFLX and the relatively low multiples of their competitors WMT (AMZN competition), ORCL (CRM competition) and AAPL (NFLX competition).
American Airlines Is Ridiculously Expensive [View article]
The cap is mentioned in the above link. But the main thing to consider is that if the share price is above the Value Hurdle Price, then AAMRQ shareholders can potentially gain more than just an additional 3.5% of the company. Hence why the stock could be worth more than $2.70.
American Airlines Is Ridiculously Expensive [View article]
Hank, there may be selling pressure on the stock of the merged entity for the reasons you describe, but it's not guaranteed. If buyers perceive the stock to be undervalued, then they will buy the shares dumped by AMR's creditors.
American Airlines Is Ridiculously Expensive [View article]
We agree that the merger plan has not yet been finalized. But for example, using a Value Hurdle Price of $14, and a LCC price of $16, AAMRQ could be worth $5, comprising of $2 of Initial Old Equity Allocation and $3 of Market-Based Old Equity Allocation.
American Airlines Is Ridiculously Expensive [View article]
Your statements are correct, but they ignore the option value that accrues to AAMRQ shareholders. Again, what is the Value Hurdle Price that you are using in your valuation of AAMRQ?
American Airlines Is Ridiculously Expensive [View article]
Jacob,
1 and 2. You are correct regarding "some of our creditors agreed", however, let's assume for the moment that all creditors agree to shareholders receiving the 3.5% ("Initial Old Equity Allocation") as well as Market-Based Old Equity Allocation.
3. The sentence you quote is vague, however, if you look at the following exhibit 10.1 http://1.usa.gov/10KuIjs
the Market-Based Old Equity Allocation is described in detail. Our understanding of this allocation is that once the Value Hurdle Price is achieved, AAMRQ shareholders receive additional shares covering not just their 3.5% equity stake, but the entire 72% owned by AMR stakeholders. Therefore there is significant option value in AAMRQ until the 120th date after the merger is closed.
American Airlines Is Ridiculously Expensive [View article]
It doesn't just say that AAMRQ "might get a little bit more" - the exhibit 10.1 we linked above describes how AAMRQ shareholders will receive a substantial amount of additional shares if the shares exceed the Value Hurdle Price on four dates following the completion of the merger.
American Airlines Is Ridiculously Expensive [View article]
Jacob,
It seems like you are ignoring the option value of the potential to receive additional shares. This forms the majority of AAMRQ's current valuation.
Maybe this is best described by asking you a question - what is the Value Hurdle Price that you are using when stating that the valuation of AAMRQ "doesn't even come close to making sense if we look at the details of the merger" ?
4 Of The Best Stocks I See In This Market [View article]
FAF Research, it really depends on timeframes. While CZR has done well today rising to 15.83, the bonds again haven't moved up by any noticeable amount since the first online gambling news came out in early February. So while the stock can continue to do well in the short-term, the bonds are strongly suggesting that CZR's long-term future is in doubt. An alternative way to think about it is that it is possible today to get a 20% yield on CZR's debt each year for 5 years, and be senior to the equity in the capital structure. Alternatively if you buy CZR stock you may get more than 20% but you could also lose money in the forthcoming 5 years.
4 Of The Best Stocks I See In This Market [View article]
"Analysts estimate CZR could add an incremental $300-$400 million of EBITDA". While this is good news for CZR, it isn't enough compared to the (approx.) $2 billion interest it pays each year on its massive $20 billion debt. Despite the recent runup in CZR stock, many of its junk bonds are trading with yields close to 20%. More info in our article here: http://seekingalpha.co...
American Airlines Is Ridiculously Expensive [View article]
It is difficult to say AquaResearch. There are so many variables, the main one being the value of the (creditors) claims pool that will receive shares. Even if you do have an estimate for that number you then need to estimate the option value of receiving additional shares on four separate unknown dates in the future where there aren't LCC options contracts that have the same strike price or expiry date. You could say that with LCC at $15.50, then AAMRQ is worth $4.00, but that is just a very vague estimate, which could swing 50% or more in either direction depending on the size of the claims pool and the closing date of the merger.
American Airlines Is Ridiculously Expensive [View article]
thedesigngallery,
Depending on the share price of the merged entity at various dates (after merger completion), AAMRQ shareholders may be entitled to receive additional shares..
American Airlines Is Ridiculously Expensive [View article]
Jacob, your analysis does not include an allowance for the potential for AAMRQ shareholders to receive additional shares following completion of the merger.
Suntech Power May Already Be In Bankruptcy [View article]
Our tongue-in-cheek quantitative explanation for the current STP valuation is the (1) quantity of money printed by the Fed and (2) the low quantity of fear, as shown by the VIX and other similar indicators.
That and the hope for a Chinese government bailout that is beneficial for shareholders.
A Couple Of Comments On JPMorgan's Downgrade [View article]
Did you see the Barrons article about AMZN, CRM and NFLX?
http://on.barrons.com/...
Similar to your idea of buying AAPL and shorting AMZN, Barrons points out the high multiples of AMZN, CRM and NFLX and the relatively low multiples of their competitors WMT (AMZN competition), ORCL (CRM competition) and AAPL (NFLX competition).
American Airlines Is Ridiculously Expensive [View article]
American Airlines Is Ridiculously Expensive [View article]
American Airlines Is Ridiculously Expensive [View article]
American Airlines Is Ridiculously Expensive [View article]
American Airlines Is Ridiculously Expensive [View article]
1 and 2. You are correct regarding "some of our creditors agreed", however, let's assume for the moment that all creditors agree to shareholders receiving the 3.5% ("Initial Old Equity Allocation") as well as Market-Based Old Equity Allocation.
3. The sentence you quote is vague, however, if you look at the following exhibit 10.1
http://1.usa.gov/10KuIjs
the Market-Based Old Equity Allocation is described in detail. Our understanding of this allocation is that once the Value Hurdle Price is achieved, AAMRQ shareholders receive additional shares covering not just their 3.5% equity stake, but the entire 72% owned by AMR stakeholders. Therefore there is significant option value in AAMRQ until the 120th date after the merger is closed.
American Airlines Is Ridiculously Expensive [View article]
American Airlines Is Ridiculously Expensive [View article]
It seems like you are ignoring the option value of the potential to receive additional shares. This forms the majority of AAMRQ's current valuation.
Maybe this is best described by asking you a question - what is the Value Hurdle Price that you are using when stating that the valuation of AAMRQ "doesn't even come close to making sense if we look at the details of the merger" ?
4 Of The Best Stocks I See In This Market [View article]
4 Of The Best Stocks I See In This Market [View article]
http://seekingalpha.co...
American Airlines Is Ridiculously Expensive [View article]
American Airlines Is Ridiculously Expensive [View article]
Depending on the share price of the merged entity at various dates (after merger completion), AAMRQ shareholders may be entitled to receive additional shares..
American Airlines Is Ridiculously Expensive [View article]
This is described in detail in this SEC filing:
http://1.usa.gov/10KuIjs
on page 5 under the heading
"Market-Based Old Equity Allocation"
Something Is Seriously Wrong With Salesforce [View article]
http://yhoo.it/XEVmY9
which means more acquisitions and more revenue.
Suntech Power May Already Be In Bankruptcy [View article]
That and the hope for a Chinese government bailout that is beneficial for shareholders.